What assets and liabilities are divided in a divorce?
Assuming no prenuptial or postnuptial agreement, all assets and liabilities are considered part of the “marital estate” for purposes of division in the marital estate. This means it does not matter how the asset or liability is titled – it still gets included in the overall estate. For example, if you own the marital residence in just your name and your spouse has a credit card in just his/her name, both the marital residence and the credit card are counted as parts of the marital estate?
What date is used to value the assets and liabilities in the marital estate?
Any date can be used between the date of filing of the petition for divorce and the final hearing on the divorce. In most divorce cases, the date of filing is the date that is used. It is important that all assets and liabilities use the same or close to the same date.
How are assets and liabilities valued?
For many assets and liabilities such as bank account, retirement account, credit cards, etc., the value is simply the account balance on the date you are using (see above). For assets that do not have an easy-to-determine balance, the fair market value is used. The fair market value is the value you could sell the item for on the market. For vehicles, the Kelly Blue Book value is often used. For real estate, an appraisal is ideal but market analysis and tax assessed value can also be used (typically, these are used in negotiations; if the case goes to court an appraisal is likely necessary if the parties do not agree on the value). For personal property such as furniture, the value is basically the value you could sell the item for at a garage sale. Occasionally parties will need/want to have personal property appraised as well.
How is the estate divided?
The Indiana Code provides that the Court “equitably” divide the marital estate. It is important to realize that the statute does not say the estate is divided equally. The court can then consider certain factors to determine whether an inequitable division is more appropriate. Some of these factors are the earning ability of each party, assets/liabilities contributed by each party at the beginning of the marriage, assets accumulated due to inheritance/gift. The reality is that a court has broad discretion in dividing a marital estate. Divisions have been upheld as disparate as 91% to Wife, 9% to Husband.
With that said, most divorces settle and that means the parties determine what is fair in terms of dividing the estate. Most divorce settlements settle between 40/60 and 50/50.
This division is representative of how the overall estate is divided. That means that each individual asset or liability is not divided by the percentage, but instead the estate is divided overall by these percentages. Our next question will show an example of this.
Can you give me an example of the division of a marital estate?
Once all assets and liabilities are determined, the total value of the net marital estate can be determined. Below is a made-up marital estate, where the parties own a home with a mortgage, have some bank and retirement assets as well as some liabilities:
In that case, the total net marital estate is $90,000. In order to divide this estate, 50/50, each of the parties would need to end up with $45,000. This 50/50 division could look like this:
Note that while some of the assets are divided, some are assigned to one party entirely.
A 60/40 division of this same estate could look like this:
Do you have any questions that pertain to the division of assets and liabilities in a divorce?